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Publication details

This report reviews the role and objectives of payment systems in the English NHS, focusing on Payment by Results (PbR), which accounts for around 30 per cent of the total English NHS budget.

It also considers the experiences of other countries using similar payment systems. It explores whether payment systems in general, and PbR in particular, are still fit for purpose, given changing policies and priorities, such as the need for disease prevention, the prevalence of long-term conditions, the changing economic environment. It argues that more flexibility should be encouraged in payment systems to accommodate change and offer the right incentives for cost-effective, high-quality care.

Key findings

Payment systems are only one of many ways of promoting health policy objectives and they may not be as effective as other means.

Different services require different payment systems, and several different approaches are therefore needed across the NHS. PbR is most appropriate to elective care and less suited to other services.

A radical rethink is needed to develop more comprehensive or global capitation payments, but payment systems need to be flexible so they can adapt at a local level to changing policy at a national level.

Different objectives means there will inevitably be trade-offs; the starkest of these is between cost and quality, and cost and maintenance of supply. High-quality standards and low prices, for example, could lead to limited supply.

The impact of payment systems is still not well researched and data is limited. The payment system needs to be underpinned by good information and analysis.

Policy implications

The NHS Commissioning Board and Monitor should develop a payment strategy that is clear about the role and objectives of PbR. This should be part of a new framework that allows different payment systems for different types of service, and which also allows local flexibility on a clearly agreed basis.

Such a payment strategy should recognise how trade-offs between objectives will be handled, how robust data will be gathered for evaluation, and how that evaluation will be used to develop the system further.

Comments

Anthony Rowbottom

Position

Head of Health & Engagement,

Organisation

Clinical Current

Comment date

02 November 2012

Completely agree with the reports findings - in particular the need to gather robust data. But gathering data is not enough. Often larger organisations simply do not understand what to do with the data or how the data can be used to improve services & reduce costs...that's what's going to be interesting to follow in the next year or so.

Mick Smith

Position

Partner Governor,

Organisation

West Suffolk Hospital NHS FT

Comment date

02 November 2012

I agree with what has been written above - especially the comment regarding high quality and low service provision as that is exactly what happened back in the 80's and 90's and we do not want to return to that at all or we will have totally wasted tax payers money that was spent upgrading the whole system over the past 10 years.

Claus Credé

Position

Head of Contracts,

Organisation

East & North Herts NHS Trust

Comment date

02 November 2012

We shouldn't underestimate the important role that PbR plays in getting clinical engagement to the economics of providing health care. In combination with PLICS (Patient Level Information and Costing Systems), PbR enables us to ask questions such as "patient X's treatment cost 50% more than the revenue that was earned - why?". These are far more powerful questions than "why was your budget overspent by 10% this month?". Any changes to the funding system have to retain the potential to link treatment revenues to costs at a patient level in a way that is easy for clinicians to understand. Since PLICS is in its infancy in many parts of the NHS, I don't believe we have seen anything like the full opportunity of this approach yet.

Mike Davidge

Position

Head of Measurement,

Organisation

NHS Institute for Innovation and Improvement

Comment date

04 November 2012

I have a nice example of the improved data definitions that are needed for payment systems like PbR to keep up with clinical innovation. Ambulatory emergency care (patients seen and discharged from hospital on the same day) activity is being recorded variously as inpatient or outpatient activity. The latter is probably more within the spirit of the pathway but Trusts that do so face a stiff financial penalty because they will only get reimbursed the standard outpatient tariff of £100-£150 or so. In contrast inpatient activity attracts the short stay emergency tariff (if there is one) or the full inpatient tariff (if not). This can be up to a factor of 10 higher. And in neither case can the commissioner identify these patients from the regular commissioning datasets. What is really needed of course is a new definition somewhat akin to the way that elective day cases can be identified separately from elective inpatients. However that is not even a glint in the eye of the NHS Data Standards team. In the meantime enlightened providers and commissioners negotiate a locally agreed tariff to reflect the work done to treat these patients.